Is it time to close your Texas corporation, but you’re not sure where to start the process?

Dissolving a corporation is a lengthy but manageable endeavor. And every state’s procedure looks a bit different. In this guide, we’ll cover the state-specific components of dissolving your Texas corporation. In no time, you’ll be on your way to whatever’s next.

Tip: While ZenBusiness does not currently offer company dissolution services, there are other options online that do. These company dissolution services are also able to dissolve your entity for a small fee so you can move on.

The Basics of Dissolving a Texas Corporation

In general, every dissolution follows the same basic structure, with 5 basic steps. There are, of course, a lot more “nuts and bolts” to the process (read more about them here), but for now, let’s get a bird’s eye view:

  • Vote to dissolve the corporation: Corporations are not solo endeavors, and ending them isn’t one individual’s call. First, your board will need to convene and vote on a motion to dissolve the corporation. After that, some corporations will need to have their shareholders vote for the dissolution as well (depending on the corporation’s bylaws).
  • File the dissolution paperwork: Once your corporation’s members have decided to dissolve, you’ll reach out to the Texas Secretary of State and fill out the appropriate Certificate of Termination.
  • Fulfill your tax obligations: Your corporation will need to pay any taxes due to the IRS and the Comptroller of Texas. This can be a multi-step process as you liquidate assets and pay any creditors.
  • Cancel licenses and close accounts: If your corporation maintains any licenses or permits, this is the time to cancel them so you aren’t charged renewal fees. You should also close down accounts with vendors and your bank (once your financial affairs are settled).
  • Notify your stakeholders: A dissolving corporation must settle any financial debts, liquidate its assets, and distribute the appropriate funds to its shareholders. Stakeholders must be notified so they can lay claim to their share in a timely fashion.

That’s the gist of dissolving a Texas corporation. But before you can truly start the process, you’ll need to answer one important question.

Who’s Dissolving the Texas Corporation?

Two key groups can dissolve a corporation: the original incorporators and the initial board of directors or the shareholders. The group initiating the dissolution affects how you file with the Secretary of State. So let’s talk about each.

Dissolving a Texas corporation by the incorporators or initial board of directors

In some cases, a Texas corporation might decide to dissolve before they really get things up and running. More specifically, if the corporation hasn’t issued stock or conducted any business yet, then the incorporators or initial directors will be the ones who vote to dissolve the corporation.

Once the dissolution vote passes, the corporation can start the paperwork process. First, you’ll need to get a certificate of tax clearance from the Comptroller. Once you have it, you can file the Certificate of Termination. Here’s the information required to complete this document:

  • Name of the business
  • Type of business being dissolved
  • Date the entity was formed
  • File number issued to the business by the Secretary of State
  • Name and address of each governing person for the business
  • Nature of the event causing termination: voluntary dissolution
  • Effective date of the filing
  • Attached tax clearance from the Comptroller of Texas
  • Date the document was executed
  • Name, title, and signature of an authorized officer

There isn’t a fee for obtaining a tax clearance certificate, but the Certificate of Termination costs $40. It’s reasonable to expect the Comptroller to take 4-6 weeks to process the certificate, and then the Secretary of State should process your paperwork within 3-5 business days.

Dissolving a Texas corporation by the shareholders

In a corporation that has issued shares, the dissolution process looks a little bit different, especially at the voting stage. Typically, the board votes for a motion to dissolve the corporation. Then that vote is brought before the shareholders for approval.

Once the shareholders have approved the dissolution, the corporation can file the paperwork steps, starting with obtaining a certificate of tax clearance from the Comptroller of Texas. Once it’s in hand, the corporation can file the Certificate of Termination (linked above). This form is identical to the one above. It costs $40 to submit.

The tax certificate usually takes 4-6 weeks to process and the Certificate of Termination takes about 3-5 days.

What About Administrative Dissolutions?

Sometimes, the state of Texas may force a corporation to dissolve against its will. Usually, this happens because a corporation hasn’t filed its annual report, paid its taxes, maintained its registered agent, renewed appropriate licensure, or some other clerical error. A corporation may also be dissolved for any activities that are ruled fraudulent or otherwise harmful to the public.

In most cases, these corporations can be restored and resume business. The process can be quite a hassle, but it is manageable. First, a corporation must resolve whatever issue caused its dissolution. A corporation with defunct annual reports, for example, would need to submit the reports and pay any missing fees (plus late fees).

After that, you’ll need to file for a tax compliance certificate from the Comptroller. Once you have it, you can formally apply for reinstatement by filing the Application for Reinstatement. There is a $75 filing fee. Texas charges some pretty hefty late fees for delinquent franchise tax reports, too. So you should expect your total fee to cost more than $75.

It’s far easier to avoid dissolution entirely; remain compliant with your corporation, and you can skip this step completely.

Frequently Asked Questions

What happens to my Texas business name?

After you dissolve your corporation, your name immediately becomes available for other businesses to use. That’s why we highly recommend being 100% sure that you’re done conducting business before filing any dissolution paperwork.

Can I change my mind and go back into business?

You technically can’t revoke your dissolution if you’ve filed and fully processed your Certificate of Termination. If you’ve started the wind-up process but haven’t finished it, you can revoke the dissolution proceedings as long as you have the approval of whichever group approved the dissolution to begin with. full state guidelines for this process here.

What if I want to become an LLC instead of closing my business?

Texas allows corporations to convert into any entity type they choose, provided the proper procedure is followed. To convert into an LLC, you’ll first have to vote to convert. Then you can draft a plan of conversion, which should include the details listed here. In your plan you’ll have to include a completed Certificate of Formation. You can find the full state guidelines for this process in the state’s conversion statutes. For more information on starting and running an LLC, check out our guide to starting a Texas LLC.

Do I have to publish a notice that my corporation is dissolving?

You must notify your stakeholders in writing that your corporation is dissolving. However, there is no explicit requirement to publish notice in a newspaper.

How can I avoid being dissolved because of a registered agent issue?

In Texas, you can face administrative dissolution if you let your registered agent coverage lapse. Thankfully, you can avoid this problem pretty easily. If you’ve picked a new agent or your old agent has resigned, simply file the Change of Registered Agent/Office form as soon as possible. There’s a$15 fee.

As long as you avoid a lapse in your agent coverage, your corporation will stay compliant.

How long do Texas stakeholders have to lay claim to my corporation’s assets?

By notifying your stakeholders directly about your dissolution, Texas actually allows you to streamline and accelerate your claims process. By notifying them in writing, you actually get to set out how long stakeholders have to come forward. That said, you must give them a minimum of 120 days to make their claims. You can provide longer than that if you wish. For a fuller look at these legal requirements, check out the state’s Termination Articles.

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